Ayyyeee… What’s Goodie Everyone. So I got some tea and it involves the government of U.K and A $69 billion dollar deal between Microsoft and Activision.
United Kingdom regulators blocked the $69 billion purchase between Microsoft and the gaming company Activision Blizzard in a signal of the mounting global scrutiny of large American tech companies power.
The U.K. competition authority ruled that the combination would give Microsoft too much dominance in the fast-growing cloud-based video games market. Microsoft already owns the popular gaming console Xbox, and the deal would give it control of some of the most popular game franchises including Call of Duty, World of Warcraft, Overwatch and Candy Crush. “Microsoft already enjoys a powerful position and head start over other competitors in cloud gaming and this deal would strengthen that advantage giving it the ability to undermine new and innovative competitors,” Martin Coleman, chair of the independent panel of experts conducting the Competition and Markets Authority’s (CMA) investigation, said a statement.
The U.K.’s action comes as it faces at times competing pressures to both regulate and promote the tech sector, amid broader economic challenges. The United Kingdom unveiled a new bill Monday that would give regulators greater powers to fine tech giants if they don’t abide by rules to give customers more transparency and choice. Yet at the same time, the government has also stated that it wants to become a destination for innovators, especially in artificial intelligence.
Activision spokesman Joe Christinat said in a statement that the move contradicts what the United Kingdom has said about its ambitions to encourage tech development. “We will reassess our growth plans for the UK. Global innovators large and small will take note that despite all its rhetoric the UK is clearly closed for business,” he said in a statement.
Microsoft announced it was paying $69 billion for Activision when the deal was announced in January 2022. But some calculations value the deal closer to $75 billion, given the current pricing of Activision’s outstanding shares. Acquisitions have been key to Microsoft’s strategy, as it seeks to diversify beyond its core businesses of cloud computing, workplace software and personal computers. It has pushed into social media with its purchase of LinkedIn and expanded into developer tools by buying GitHub. Recently, the company has pivoted to focus on generative AI, where its investments in OpenAI and use of its ChatGPT technology have given it a surprising early edge against competitors and which chief executive Satya Nadella described in an earnings call this week as a “generational shift.”
Microsoft already accounts for an estimated 60 to 70 percent of global cloud gaming services, and it has other advantages because of its existing Xbox business and cloud computing services, the U.K. regulator concluded. The agency’s focus on the nascent cloud gaming market signals that regulators are taking a more forward-looking approach to tech deals, following years of criticism that antitrust enforcers did not consider the long-term impact of tech titans gobbling up their much smaller rivals.
Microsoft’s cloud gaming offering is part of its subscription service, Xbox Game Pass, which the company said this week has expanded to 40 new countries and is helping drive Xbox revenue growth “in the low- to mid-teens.”
The U.K. regulator rejected a proposal from Microsoft that would have set out requirements governing which games must be offered to certain platforms, and on what conditions, something that would have played out over a 10-year period. It also said Microsoft’s proposal was not sufficiently open to providers who might want to work on systems other than Windows. Such an agreement would also put too much regulatory oversight over individual games and platforms.
Credit: The Washington Post.